Proposition 13 did what it was designed to do

On the 30th Anniversary of Proposition 13

Joel Fox

Published
4:00 am PDT, Friday, June 6, 2008

After Proposition 13 passed 30 years ago today, Newsweek noted, "The California tax revolt had raced the middle-class pulse of the country as feverishly as anything since the invention of the station wagon."

Since then, the taste in cars for the middle class has changed from SUVs to crossovers to hybrids, but the pulse for Proposition 13 remains strong. Recent polls show that California voters support Proposition 13 by the same 2-1 margin it passed by in 1978.

And, make no mistake - Proposition 13 was a tax revolt, but it was also a revolution. By setting the tax rate at 1 percent of the market value of a property and allowing taxes to rise only 2 percent a year, the taxpayer knew what his taxes would be when he or she bought the property and into the future.

For the first time in the history of property taxation, certainty in taxes belonged to the taxpayer instead of the tax collector.

Proposition 13 did not cut growth in government dollars. Governments have more revenue in constant dollars today than they did prior to Proposition 13. That point includes the schools. Per-pupil spending is higher today than it was in 1978 in constant dollars. How the money is being spent is another question.

Property tax for local governments has been one of the most stable tax sources, growing steadily every year. The state doesn't seem to be too restricted by Proposition 13's mandate requiring a two-thirds vote to raise taxes, either. In the last four years, the state general fund has grown more than 30 percent, from about $75 billion to more than $100 billion.

Proposition 13 has been criticized for 30 years by those who wish the obstacle to higher taxes would disappear. The ballot measure has been blamed for fees and potholes, terrible schools, collapsing bridges, murdered children, and even the not-guilty verdict in the O.J. Simpson trial.

These arguments are as wrong as the sign that was placed in the San Francisco Public Library that read: "Notice: If Proposition 13 passes on June 6, the San Francisco Public Library will close, effective June 30, 1978."

It is true that the state Legislature has taken power away from local governments and that has come at a cost to the local residents, which was not the intention of Proposition 13's authors. However, the remedy would be politically difficult. Send revenues to local governments with no strings attached. That is asking politically ambitious state legislators to give up power and control over money - the DNA in every politician.

As to the oft-raised issue of taxpayers in similar homes paying different amounts of taxes depending on when they moved in: it must be emphasized that Proposition 13 protects every homeowner equally. Each homeowner knows what the property tax is going in and is protected from outrageous increases. No longer will a converted garage in the Silicon Valley, selling for $1 million, force small homes around it to be hit with huge increases in property tax bills.

That certainly is a key ingredient in taxation policy. As Adam Smith said in his classic economics work, "The Wealth of Nations": "The certainty of what each individual out to pay is, in taxation, a matter of so great importance, that a very considerable degree of inequality ... is not near so great an evil as a very small degree of uncertainty."

Proposition 13 did the job it was designed to do. The measure stopped people from losing their homes to the tax collector, and it provided for the success it has achieved. But instead of asking the special interests, just ask the people of California.